Correlation Between Prestige Brand and Collegium Pharmaceutical

Can any of the company-specific risk be diversified away by investing in both Prestige Brand and Collegium Pharmaceutical at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Prestige Brand and Collegium Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prestige Brand Holdings and Collegium Pharmaceutical, you can compare the effects of market volatilities on Prestige Brand and Collegium Pharmaceutical and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Prestige Brand with a short position of Collegium Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prestige Brand and Collegium Pharmaceutical.

Diversification Opportunities for Prestige Brand and Collegium Pharmaceutical

-0.47

Correlation Coefficient

Prestige Brand  Collegium Pharmaceutical

Very good diversification

The 3 months correlation between Prestige and Collegium is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Prestige Brand Holdings and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and Prestige Brand is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Prestige Brand Holdings are associated (or correlated) with Collegium Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collegium Pharmaceutical has no effect on the direction of Prestige Brand i.e., Prestige Brand and Collegium Pharmaceutical go up and down completely randomly.

Pair Corralation between Prestige Brand and Collegium Pharmaceutical

Considering the 90-day investment horizon Prestige Brand Holdings is expected to generate 0.89 times more return on investment than Collegium Pharmaceutical. However, Prestige Brand Holdings is 1.12 times less risky than Collegium Pharmaceutical. It trades about 0.08 of its potential returns per unit of risk. Collegium Pharmaceutical is currently generating about 0.04 per unit of risk. If you would invest  7,738  in Prestige Brand Holdings on December 30, 2024 and sell it today you would earn a total of  771.00  from holding Prestige Brand Holdings or generate 9.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Prestige Brand Holdings  vs.  Collegium Pharmaceutical

Prestige Brand Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Brand Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental drivers, Prestige Brand may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Collegium Pharmaceutical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Collegium Pharmaceutical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Collegium Pharmaceutical is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Prestige Brand and Collegium Pharmaceutical

The main advantage of trading using opposite Prestige Brand and Collegium Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prestige Brand position performs unexpectedly, Collegium Pharmaceutical can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Collegium Pharmaceutical will offset losses from the drop in Collegium Pharmaceutical's long position.

The idea behind Prestige Brand Holdings and Collegium Pharmaceutical pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..